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Marketing Ecologically Grown Produce in the Mainstream Marketplace

Marketing Ecologically Grown Produce in the Mainstream Marketplace

Summary

Red Tomato (RT) is a mission-driven, non-profit broker and marketer of organic and IPM fruits and vegetables, that is helping family farmers survive and profit through marketing. RT offers family farmers a durable wholesale path to market, creating opportunities for farmers to sell more, earn more, learn, improve product quality, and focus.

Accomplishments/Milestones

Milestone 1. Learning and evaluation. Thirty-three farmers and Red Tomato, together, will evaluate the season just ended, incorporating feedback from customer evaluations, and will identify: successes, missed opportunities, areas for change or improvement, and whether or not to continue another year.

RT and growers incorporated the lessons and experiences from 2002 into planning for the 2003 season. There were lessons learned with growers regarding pricing, packaging, and the market. For example, the new peach baskets we piloted in 2002 proved not to be a good package for consumers and trade buyers. The fruit moved and bruised easily inside each case, and the handle-less baskets were difficult for consumers to pick up. In 2003, we dropped the peach baskets and piloted a “Born and Raised Here” ¼-peck tote bag for peaches.

However, the most significant learning that occurred during the 2002 season was about the RT operating model. At the end of the 2002 season it became clear that the model of direct-store-door distribution of [locally grown] seasonal produce, was not on track to becoming self-sufficient. The cost of maintaining warehouse and cooler infrastructures and of running trucks for produce that was available only part of the year, and for a limited fruit and vegetable product line, was too high.

In an effort to make this program financially stable, RT made a dramatic shift in 2003 in its operations, dropping in-house warehousing and direct-store-door (DSD) trucking to individual retail outlets. RT sublet its warehouse space, and outsourced the distribution to independent truckers and growers. RT still managed the distribution chain from farm to customer, which involved intense coordination. But we did not have our own trucks on the road. RT shifted its delivery from DSD to individual retailers to central warehouses and distributors. We became more like brokers and less like distributors. For the results of these changes, see “Outcomes” below.

Another key lesson we learned was that in order for our work to be manageable and sustainable, and in order to have a greater impact on the local agricultural community, we had to focus on fewer crops, and do a better job marketing each of them. In 2001-2002, we handled approximately 100 different varieties of produce items, many of which moved in small quantities. In 2003, we limited the number of main produce varieties to about 30, with a major emphasis on apples, peaches, strawberries, lettuce, peppers, tomatoes, sweet corn, and summer squash, all key crops in the Northeast. Brokering fewer crops in 2003 enabled us to concentrate sales efforts and promotion dollars on fewer crops, and was more manageable.

In spite of this new strategic move, we did conduct a separate pilot program for NAFI (the New American Farmer Initiative program), which involved almost 100 different types of specialty Asian vegetables. We coordinated the shipment and sales of these products once a week to two institutional food service providers. This program differed from our main local program in that the customers were food service providers, they ordered in small quantities, got deliveries only once a week, and required a different distribution channel. The small orders were consolidated at a farmer’s warehouse in Western MA before being put on a truck for delivery. The customers were satisfied with this program and the quality of service they received. However, the operation was resource intensive and had to be subsidized. We learned that it would require an investment of a significant amount of time and resources to developing a viable distribution system linking numerous small-scale growers and institutional food service providers.

Milestone 2. New farmers/new programs. In pursuit of growth and new opportunities, RT will consider 10-20 prospective farmers. We explore (i) how strong is the match and (ii) how well we might, jointly, take advantage of marketing opportunities (that already participating farmers are not going to fulfill).

In 2003, RT purchasers explored relationships with eight farmers in the Northeast (MA, CT, and NY), all of whom were either new to RT or whom we did not work with the previous season. RT marketed produce from all eight of these growers. Most of these products increased volume to RT’s established lines, such as apples, peaches, lettuce, and tomatoes. A few products were new to RT, and moved in small quantities, such as sweet cherries and certified organic Asian vegetables.

Milestone 3. Planning at the detail-level. Forty-three farmers, returnees plus new participants, with RT, will nail down a plan for changes and improvements needed, including products (crops/varieties), post-harvest handling, order/delivery cycle, customers, technology, pricing, certifications, special promotions, and timelines.

Winter and spring work with growers involved discussions about products, volume, distribution options, order placement and pickup schedules, post-harvest handling, and packaging and promotion. We designed new, small tote bags for peaches, for which growers received higher than market prices. RT purchaser discussed with growers whether or not they should sticker their native tomatoes. (In the end we developed tomato stickers. Two growers stickered their tomatoes and received higher prices for them). RT partnered with a grower in Western MA and worked out systems to have produce from a number of small farms consolidated at the grower’s farm, so this produce could be picked up and delivered to two institutional customers. We worked through quality control issues with growers of the most perishable products, strawberries and raspberries, so that the berries could withstand distribution through our customers’ central warehouses. Pricing apples to get business proved to be a complicated negotiation between growers and customers. RT hired a photographer to take picture of 7 farmers and designed a series of farmer posters that were displayed in Stop & Shop supermarkets’ produce departments (see hard copies of promotional materials). RT also redesigned point-of-sale cards for individual products.

Because RT changed its operations from DSD to brokering, RT had to find new ways to reach its customers. RT formed a relationship with a former competitor (a produce distributor), Shapiro Produce. RT convinced Shapiro to buy RT’s local products and distribute them to their customers, which included RT’s long-time customers, Donelan’s Supermarkets and Harvest Coops. Shapiro also sold RT produce to its other supermarket customers in MA, CT, and RI. RT also had to develop a plan to service Stop & Shop through its main warehouse, which took some work. In the end, S&S gave RT spaces in its warehouse specifically for RT’s local products, and these products went to eight of S&S’s stores where RT concentrated its promotion efforts. Some RT produce, such as apples, went to all of S&S’s stores (S&S has 341 supermarkets in the Northeast). RT also shipped produce through Whole Foods central warehouse. Another hurdle in systems we overcame was finding and coordinating independent trucking companies to pickup product at farms and deliver them to customers’ warehouses. RT primarily worked with one company, Tony’s Trucking, for most of this distribution. And in some cases, farmers delivered directly to warehouses.

Thirty-one growers from the Northeast distributed produce through RT during the 2003 season (See Appendix A, Participating Farmers 2003), resulting in sales of $463,000. (RT also worked with 20 watermelon farmers from the Federation of Southern Cooperatives in the Southeast US). The decrease in number of Northeast farms that we worked with, from 33 in 2002 to 31 farms in 2003, was the result of changes in sales strategies by our growers, as well as RT’s new strategy to focus on fewer crops and doing a better job selling them. Out of the 31 local growers, three are certified organic and twenty-one growers actively practice IPM.

Impacts and Contributions/Outcomes

Our internal analysis of benefits that the top eighteen growers/growers’ groups received by working with Red Tomato was that the majority of the growers experienced two or more of the positive changes or benefits outlined in our performance target. Please see Attachment “RT Farmer Benefits” for these results.

New markets: Almost all of the growers RT works with have new markets for their crops as a result of selling through Red Tomato. By working with RT and its customers, these farmers diversified their customer base and mitigated their risk.

Better returns: More than two-thirds of RT growers received higher than average market prices for their crops in 2003. RT paid higher than market returns for tomatoes, lettuce, peaches, summer squash, zucchini, and strawberries. Due to intense market conditions, RT paid growers market prices for green beans and apples.

One of our growers, Richard Bonanno of Pleasant Valley Gardens (PVG), conducted a detailed analysis of his sales to Red Tomato and to his other main customer. After deducting all the costs of doing business with both customers, Bonanno reported that he earned $10,000 more in profit by doing business with Red Tomato than if he sold the same produce to his other customer. This is a significant return, considering that Bonanno only sold $59,000 worth of produce through Red Tomato. Red Tomato paid Bonanno significantly more for his lettuce than his other customer.

Another grower, John Lyman, was unhappy with RT’s return on apples, but was pleased with the price he received on peaches. In a conversation with RT’s purchaser, Lyman said “[About apples] we haven’t been able to differentiate enough to keep up that premium. It started off better. I’m not sure I shouldn’t have expected it. I know that what you’re selling RT product for is above average, and that you need to make some [margin] too. But right now, it feels like downward pressure more than anything else.”

Lyman also said, “[On peaches] you were able to maintain a good price. We never had to use the Hartford market this year. You gave me the consistent order each week which took a lot of pressure off. And I built [our other peach sales] around that. When I sold to a Waterbury broker and to Stew Leonard’s in Danbury, [it was] $15.00/case to them delivered. You did a nice job with $18.00/case FOB no question.”

Red Tomato had growers sticker their tomatoes this year. RT’s price for Mann Orchard’s stickered tomatoes was $14.50 - $17.50/case, while his unstickered tomatoes fetched $12.00 -$14.00/case at the Boston Terminal Market. Bill Fitzgerald of Mann Orchards told RT purchaser, “What you did for us was very good. We were well compensated for the labeling work we did for you, even though the guys were complaining a bit. And even though they got our fanciest tomatoes. I’m pleased. Thank you for a good season.”

Enhanced name/brand equity: The amount of enhanced name/brand equity that each grower experiences is difficult to measure. However, RT produced and distributed promotional materials on behalf of almost all the growers we worked with. These included point-of-sale cards, banners, and farmer posters.

The RT brand is based on the promotion of its farmers and their location. We put the names, faces, and locations of our farmers right on our promotional materials, next to the ‘Red Tomato’ brand. We want consumers to have access to this information, and to associate farmer faces and familiar places with Red Tomato.

We expect increasing brand recognition to be a long-term process. However, there is evidence of some positive brand recognition by trade buyers for Red Tomato products. Shapiro Produce, a distributor serving supermarkets in four states, said that Red Tomato’s branded apple line differentiates his company, and he wants to do more with the brand. (Red Tomato apple tote bags bear the slogan, “Born and Raised Here.”)

Diversification: RT supports growers who are diversifying their farms to spread out their risk and to get away from low-income earning commodities, such as McIntosh apples. Most brokers are only interested in the key crops they trade in volume, and do not develop new markets for growers to help them stabilize their business. RT has supported its growers’ efforts by finding markets for the new crops they grow, such as peaches, heirloom varieties of apples, and unique products like sweet cherries and edamame. This benefit is realized by those growers who diversified their crops.

Improved or market-matched product quality: Unlike many other brokers, RT does work with growers to help them improve the quality of their product through different packaging or post-harvest handling techniques. And RT is in constant communication with growers during the season, giving them feedback from trade buyers about their products, their quality, and packaging. During the local strawberry season, RT’s purchaser is on the phone with growers several times a day, often relaying information that determines how and at what stage growers pick and ship their berries. This prevents rejections at the stores of a highly perishable and valuable fruit.

Sharper focus: RT does handle marketing and promotion for its growers to its customers. Growers do not have to directly interact with RT’s multiple customers and do not have to do their own promotion. Some growers are excellent farmers, but dislike the grind and tough fight of sales to supermarkets and distributors. One of our growers, Zeke Goodband of Scott Farms in VT, hates selling to big companies, and is happy to have RT deal with the Wholefoods regional buying office on his behalf.

Enhanced job satisfaction through a trade relationship that incorporates transparency, trust, feedback, and planning: This benefit is acknowledged by most RT growers as significant, although many not may call it “enhanced job satisfaction.” Most growers appreciate and recognize the level of trust and openness they have with RT, and the constant feedback they receive from RT throughout the season.

The result of the changes in operations away from DSD was that our operating costs dropped significantly, while our productivity went up. Sales were lower, but they were achieved using significantly less resources. Total sales in 2002 were $671K, of which $584K was for trade with Northeast farmers. Total sales in 2003 were 607K, of which $462K was for trade with Northeast farmers. Our initial estimate is that the 2002 sales were achieved with 7.3 full time labor equivalents, compared to 2.5 full time equivalents in 2003. The savings in the cost of labor alone was dramatic between 2002 and 2003. And related operational expenses, including trucking, warehousing, and electricity, also decreased in 2003. The changes we made in the operating model have given us a viable way to continue to work with growers in the future. Figuring out how to accurately measure and track productivity will be a key component of our work in 2004.

Two of the main warehouses we supplied were able to handle the produce and maintain its quality through to individual retail outlets. However, the quality of produce suffered through one major chain’s central warehouse. This company was not able to manage our inventory in its warehouse, and RT products often arrived at the supermarkets in poor condition. This is an important issue we will try to resolve in 2004.

By going through a distributor and our customers’ central warehouses in 2003, RT products were able to reach many more stores than in the past. Our customers’ distribution infrastructures serve hundreds of retail outlets. We do not know the exact number of stores that received our products in 2003 through these distribution systems, but we estimate between 100 - 425 stores received our produce, compared to 30-40 stores in past years.

RT remains one of few, if not the only, broker in the region that actively markets locally grown produce as IPM. RT has learned that IPM can be marketed to trade buyers as part of a larger promotional package that leads with “locally grown,” and includes a mix of other selling points and/or advantages, such as promotional support, unique varieties, unwaxed products, improved packaging, tree-ripened products, and the ability to support small-scale family farms. We don’t think IPM can be isolated as a unique selling proposition to increase price, but it is an excellent companion with local and some of the other benefits listed. RT is committed to improving the promotion and marketing of IPM products in the future.

Red Tomato concentrated its 2003 promotion efforts on fewer products in an effort to make more of an impact with each one. RT’s 2003 promotion efforts were:
1) Point-of-Sale Materials: Re-designed point-of-sale cards, (in color, product-specific, laminated, customized sizes, each one showing the farm’s name and location, plus product attributes, including IPM production methods as a point of differentiation); product stickers, i.e. tomato stickers; seven new farmer posters, 2’ wide by 3’ high, listing the grower name, farm name and location, and production method used; “Born and Raised Here” tree fruit tote bags, emphasizing the use of ecological production methods and bio-regional approach; new Red Tomato corn bags.
2) Web site: Designed and on-line, August 2003 – http://www.redtomato.org
3) Publicity: Magazines, newspapers and on-line articles
4) Education: 24 in-store food demonstrations by Tufts U. School of Nutrition graduate students enrolled in the Agriculture, Food and Environment program

Red Tomato core staff influenced the national level discussion on sustainable agriculture, by including Red Tomato’s marketing experience and entrepreneurial perspective in numerous conferences and events during the year.

In 2003 RT participated in the following events:
1.January. Practical Farmers of Iowa, Ames, Iowa. RT managing director delivered the keynote address together with CEO Rick Schneiders of SYSCO Corp. at the PFA annual meeting. Rozyne also gave a workshop.
2.February. New England Vegetable and Berry Growers Association’s Growers Meeting. RT staff member made a presentation about RT’s work in 2002.
3.November. Community Food Security Coalition annual conference, Boston, Mass. RT participated in 2 workshops: "The Uphill Adventures of Red Tomato" and "Forging the Links Between Local Farms and Institutional Food Service".
4.November. Yale University's "Tilling the Soil. Turning the Tables" conference. RT member participated in panel presentation on "Supply & Distribution Issues"
5.December. The Future of Our Food & Farms Summit, Wilmington, Delaware. RT staff member gave keynote address/multi-media presentation, entitled: "Trading Up: the Business of Food as if Farmers Mattered". RT also ran a workshop, "The Economics of Consolidating and Trucking Small Farm Produce"
6.December. New England Vegetable & Berry Growers annual conference, Manchester, New Hampshire. RT staff member gave multi-media presentation: "The Uphill Adventures of Red Tomato"

This project and all associated reports and support materials were supported by the Sustainable Agriculture Research and Education (SARE) program, which is funded by the U.S. Department of Agriculture- National Institute of Food and Agriculture (USDA-NIFA). Any opinions, findings, conclusions or recommendations expressed within do not necessarily reflect the view of the SARE program or the U.S. Department of Agriculture. USDA is an equal opportunity provider and employer.

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